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Technological advances are changing the way that we produce, trade and consume. These changes can threaten traditional capitalist economic models however, capitalism has developed many ways of evolving. There are three key ways that allow technology firms to continue generating large amounts of profit. User generated data networks produce an alternative source of value, monopolies lead to price suppression and the development of intellectual property law makes possible closed source software models.  

New types of value production

Advances in technology are predicted to have a major impact on the value of labour in the economy, and information networks provide an alternative source of value for technology companies. Manual tasks, pattern recognition, and repeatable algorithmic processes, as well as occupations that require subtle judgement or unbiased decision making, are susceptible to computerisation.

Technology moves the focus of economic life away from labour and towards ideas and information; platforms and networks provide opportunities to generate profit from the value created by users. Databases of information are used commercially by advertising agencies, and are also vital for the running of Artificial Intelligence systems. Platforms like Facebook, AirBnB and Uber provide a service through which this data can be extracted and used. The social data generated by user interactions allows technology companies to sell this data to advertising agencies, or mine existing data for predictive value. As a result, they can establish a global network and profit from their position as service providers.  

There are large amounts of venture capital investment into startups, in the hope that they will become the next big platform, or that they will be acquired by one of the giant monopolies. Platforms are cheap to build and have low maintenance costs, however returns and profits are incredibly high. Profit can be generated by charging rent to users, as well as selling advertising space, data, and analytics.

Technology monopolies

Technology also affects both information and physical goods. An information good is a type of commodity whose market value is derived from information it contains. Examples include DVDs, music files and computer software. Importantly, they can be designed to reproduce themselves at almost no marginal cost. Software code, for instance, can be copied and pasted at no additional cost, and software like AlphaGo (a computer programme that has been taught to play a board game) and self-learning neuromorphic chips (microprocessors configured like brains using neural networks) are capable of creating value without the need for external data input. Although there may be initial costs for designing software, the reproduction costs are extremely low. Technology and software in turn affect physical goods, for example by lowering manufacturing and production costs.

However, single sector monopolies can also suppress price formation, and continue to make a profit from goods that could otherwise be much cheaper. Technology monopolies often acquire potential competitors before they become a threat. Examples of this are platforms such as Facebook’s acquisition of Whatsapp, Instagram, Friendster, Snapt and many other social media startups.

Recently, the European Union has said that search engine giant Google will face civil actions for damages from those affected by anti-competitive behavior. Intel and Microsoft have also been fined for anti-competitive practices. However, the European Commission has been criticised for its slow response to the formation of these monopolies. This has been put down to the fact that these companies operate on such large scales that it is hard for competition regulation agencies to stop these acquisitions. Google, for example, has acquired 167 companies since its European Commission inquiry began, and both Google and Apple now provide 99% of all mobile operating systems.

Intellectual property and the sharing economy

Most technology is a non-rival and inexhaustible good, meaning it can be used by multiple people simultaneously, and will not wear out. However, technology can be an excludable good, in the sense that it is possible to prevent consumers who have not paid for it from accessing it. The excludability of a good often depends on policy choice by governments, and intellectual property law often means that such information and technology are excludable. Commercial technology firms can use closed source platforms to protect their software, and may even require their engineers to sign non-disclosure agreements in order to protect intellectual assets.

Peer production initiatives are an alternative to the patents and closed source software developed by large corporate firms, however they currently operate on much smaller scales and have much lower levels of investment than the firms they compete with. The Creative Commons license permits the sharing of copyrighted material in much the same way that Open-source has licenses for sharing code, and these methods are used by many websites. Scientific research platforms often work on an Open-source model, and sharing platforms like Jupyter have proven to be more successful than proprietary models like Mathematica. These are both online platforms designed for mathematical and scientific coding and research.

Certainly, there has been an increase in collaborative production methods and platforms. However, replacing a competitive economy with publicly owned technology would require much larger investments by governments or individuals. Many government institutions are poorly set up to deal with the rise of technological innovation, and fail to make intelligent economic investments in these technologies. Governments in Scandinavia are embracing the idea of publicly owned technology, however, in 2017, over the course of ten months, Google, Facebook, Microsoft and Apple added $950 billion to their stock value which is the total Gross Domestic Product of Norway Finland and Denmark. Therefore, for these projects to succeed on a large enough scale to compete with the entrenched technology giants, they need much larger amounts of investment to make these new forms of ownership possible. Whether or not they should do so is a different question, however it is a topic that is increasingly being brought to awareness and discussed amongst policy makers, governments and institutions.

Anne le Roux is a Mathematics student at the University of Warwick. She is undertaking work experience at Bright Blue. The views expressed in this article are those of the author, not necessarily those of Bright Blue.